United States stocks closed lower as disappointing labour-market data provided little solace during the continuing stalemate in Congress.
The Dow Jones Industrial Average closed down 58.56 points, or 0.4%, to 15,133.14 points.
The S&P 500 index shed 1.13 points, or 0.1%, to 1,693.87 points.
The Nasdaq Composite Index fell 2.96 points, or 0.1%, to 3,815.02 points.
Concern over a government shutdown and a disappointing report on private-sector job growth weighed on stocks. While benchmarks gained Tuesday, the first day of the shutdown, worry had started to creep in by Wednesday morning, market participants said.
"The idea yesterday was that it's only going to last a day or two, so you might as well buy now," said Michael O'Rourke, chief market strategist at brokerage JonesTrading Institutional Services. "That didn't happen."
The Dow industrials fell as many as 147 points in early trading, though they recouped some of those losses as Senate Majority Leader Harry Reid offered to negotiate with House Republicans.
Traders said that Wednesday's losses reflected most investors waiting out the stalemate, rather than fleeing the market or cutting back on their exposure to riskier assets.
"We might be hitting a pause," said A.C. Morgan, managing director in equities trading at UBS AG. "But that's all it is."
Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago, said that buyers stepped in after the morning's sharp losses.
"Whether this occurs for the next several hours, or next several days, most are expecting Congress to come to some sort of deal," he said. So after the morning's losses, "people started to realize, look, there are buying opportunities on this weakness."
Disappointing economic news also weighed on stocks. The private sector created 166,000 jobs in September, below economist forecasts for 178,000, according to Automatic Data Processing and Moody's Analytics. Also discouraging traders was a cut to August's job-growth figure, which was revised down to 159,000 from 176,000.
The figures are seen as a preview to the closely watched government jobs report released on the first Friday of each month. But if the government shutdown continues through Friday, the data won't be released, according to the Bureau of Labor Statistics. Federal Reserve officials have said they are watching the labour market closely in order to determine when to pare stimulus efforts.
In recent months, stocks have rallied on the prospect of more Fed stimulus efforts. But investors say that because they expect the Fed to eventually cut back on its bond-buying efforts, they are shifting focus to underlying growth.
"If you saw an uptick in economic activity, that would pull profits along with it," said Mark Luschini, chief investment strategist with Janney Montgomery Scott. But "if it looks like profit growth isn't going to catch up" to the year's 18% rally in the S&P 500, "investors would mark down stock prices."
Still, Mr. Luschini said he would take this week's losses as an opportunity to buy stocks. He expects the economy to continue to grow, albeit at a slow pace, and that lawmakers' stalemate wouldn't drag on long enough to hurt the economy or put the US at risk for defaulting on its debt.
The weak jobs data prompted gains in Treasury and gold prices, as the report led to heightened expectations that the Fed would keep its full stimulus efforts in place in coming months. The yield on the 10-year note fell to 2.624% from 2.650%, where it settled Tuesday. Gold futures bounced 2.7% to settle at $1,320.60 a troy ounce. On Tuesday, futures fell 3.1%, the biggest decline in about three months, to settle at a near two-month low.
Crude-oil futures rose 2% to $104.10 a barrel. The dollar lost ground against the yen and the euro.
European markets closed broadly lower, though Italian shares gained as the country's recent political turmoil looked to be coming to an end. Italy's FTSE MIB Index rose 0.7% after former Prime Minister Silvio Berlusconi said he would support the current government coalition. The Stoxx Europe 600 closed down 0.7%.
Most Asian markets closed higher, but Japan's Nikkei Stock Average slumped 2.2% amid growing concerns over the US government shutdown and a strengthening yen, which weighed on exporter shares.
In corporate news, a trio of stocks gained in their initial public offerings. Off-price retailer Burlington Stores jumped 47%, real-estate brokerage franchisor Re/Max Holdings gained 23% and Empire State Realty Trust, which owns the Empire State Building, tacked on 0.8%. This year, the US is on pace to see the highest number of IPOs since 2007, according to Dealogic.